Lord Mackay of Ardbrecknish: My Lords, having listened to the noble Lord, he may ponder the fact that there are various professional groups within political parties. For example, if the Society of Conservative Lawyers decides to register as a third party, can it spend up to the half a million pound limit?

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Lord Bassam of Brighton: My Lords, I shall ponder that point with my usual eye to detail and return to it when I have the opportunity. No doubt I shall not be allowed to forget it.

The noble Lord, Lord Neill, was, quite understandably, concerned, as was the noble Lord, Lord Norton of Louth, about overloading the work of the electoral commission. We agree that the first priority for that commission is to put in place the controls over parties' income and expenditure. Other functions of the electoral commission will not be brought into force until some time after that body has been established. We are rather more optimistic than the noble Lord about the ability of the electoral commission to take on its broader non-regulatory, and perhaps educational, functions.

The noble Lord, Lord Jopling, spoke about the need for a clear statement on the face of the Bill to make the buying of air time illegal. I have a great deal of sympathy with that point. However, the ban is set out in a longstanding code of practice which covers the Independent Television Commission and the Radio Authority. There is absolutely no doubt about the operation of that code, and we are not immediately persuaded that the prohibition on political advertising needs to be given any further statutory force. That is something which the electoral commission will regard as an important part of its regulatory function, and no doubt it is an issue to which we can return. We are at one on that point, which was well made by a number of noble Lords.

Lord Jopling: My Lords, although it may be made clear in one place, what harm would it do to say it again clearly a second time in this Bill?

Lord Bassam of Brighton: My Lords, when we return to debate the matter at a later stage perhaps that is something to which we can give further thought.

I should like to focus on one or two points raised by the noble Lord, Lord Norton. The noble Lord asked whether consideration should be given to giving the electoral commission the job of setting referendum questions. We believe that separate legislation is required in order for any particular referendum to be held, and the questions to be asked will need to be considered in that context. It is right that the wording should be a matter for Parliament to decide. Surely, that is part of our primary purpose. It has been suggested, however, that the electoral commission should have an advisory role in setting the wording of a referendum question. That may well be an appropriate role for it to undertake. It is a suggestion to which the Government are prepared to give further consideration, although the Neill committee did not envisage that as one of the roles of the commission.

I was interested in the point raised by the noble Viscount, Lord Astor, about the commission's neutrality and independence. In another place Members of the noble Lord's party moved amendments which explicitly sought to have on the face of the Bill that no serving or former Member of the House of Commons, the Scottish Parliament, the

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National Assembly for Wales, the Northern Ireland Assembly or the European Parliament shall be eligible for appointment as an electoral commissioner. Do I now understand that the noble Viscount argues against that point?

Viscount Astor: My Lords, has the Minister not heard of probing amendments? They are tabled in this House and another place.

Before the Minister leaves the issue of the commission, why does it need to promote public awareness of the institutions of the European Union?

Lord Bassam of Brighton: My Lords, I shall turn to that point, but I had hoped for some consistency across both Houses on the need for the independence of the electoral commission. When we return to the point at a later stage, I hope that that wish will be fulfilled.

It is clearly important that the commission has the broader, educational role of explaining and underpinning governments' civic responsibility in promoting greater awareness of all our important political institutions. Some Members of your Lordships' House--the noble Lord, Lord Lamont, made this point--took a rather sinister view of the role. I have a more generous view. There is an important educative role for the commission to fulfil. However, we shall undoubtedly return to that issue.

I said that I would pick up the point raised by the noble Earl, Lord Onslow, about funding of parties from the US. An order made under Clause 65 will disapply the provisions of Part IV of the Bill in respect of Northern Ireland parties. Such an order will apply for four years in the first instance. The effect of such an order will be that parties operating in Northern Ireland will, as now, be able to accept donations from the Irish Republic and elsewhere, including the United States. The Neill committee recognised that as an inescapable consequence of its proposals. We agree that it would be preferable not to make any distinct provision for Northern Ireland parties.

The Earl of Onslow: My Lords, this seems so fundamentally true. Why is it morally wrong for a Chinese supporter of the Conservative Party to send a cheque to the Conservatives, or a Clinton supporter of the Labour Party to give the Labour Party a cheque, but not for Noraid to send a cheque to Sinn Fein? I cannot see the moral difference, except political cowardice. That is the only reason for it.

Lord Bassam of Brighton: My Lords, the noble Earl is entitled to his opinion. We have set out our stall on the issue of transparency. We believe that to be right. But we have to be realistic about what can be achieved. It was in that spirit that the Neill committee recommended that in the light of the Good Friday agreement it would be wrong to place barriers in the way of parties operating on an all-Ireland basis. That was essentially the range of its argument.

Lord Mackay of Ardbrecknish: My Lords, before the Minister leaves that point, I am trying to follow his

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argument. The noble Lord cannot pray the Neill committee in aid when it comes to taking money from the United States. Recommendation 29 states:

"In relation to donations to political parties in Northern Ireland, the definition of a 'permissible source' should also include a citizen of the Republic of Ireland resident in the Republic subject to compliance with the Republic's Electoral Act 1997".

I do not know what the Electoral Act does, but if it does not include American citizens I do not understand how the Government can pray in aid the Neil committee.

Lord Bassam of Brighton: My Lords, the noble Lord makes an important point on which we shall undoubtedly have some vigorous discussion. I do not have the report before me. However, I shall study carefully those points when I read Hansard.

The hour is getting late. The noble Lord, Lord Rennard, raised the issue of expenditure limits. The limits of £100,000 for by-elections and £20 million for national expenditure by parties were clearly recommendations of the Neill committee. We feel bound by those. We believe that they are right and proportionate.

In conclusion, political parties have a vital role to play in our representative democracy. Parties provide the link between the citizen and the government of the day. It is the political parties which formulate and articulate the clear choice between competing values and their practical manifestation in a coherent set of policies as set out in a manifesto. By presenting these competing choices at elections, political parties offer the people that fundamental right in a democratic society to determine for themselves how they are governed.

These are onerous responsibilities. People place their trust in politicians and political parties and it is incumbent on them not to abuse that trust. The secretive funding of political parties, including by foreign donors with no direct stake in how we run our national affairs, has served, we believe, to undermine that trust and weaken the compact between the citizen and the state. It is vital to the health of our democracy that the funding of political parties is open and transparent.

Lord Norton of Louth: My Lords, perhaps I may raise a small point. As did the noble Lord, Lord Rennard, the Minister refers to an open and transparent system. I am still unclear as to the difference between openness and transparency.

Lord Bassam of Brighton: My Lords, I enjoyed the observation. The noble Lord is being precise; and that is fine. But I believe that openness and transparency go to the heart of the issue. I am sure that noble Lords opposite understand and appreciate that.

The Bill will ensure that openness and transparency and it will strengthen the accountability of parties not just to their members but to the wider electorate. I should have thought that that is the biggest benefit of this legislation. In short, the Bill will strengthen the

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very fabric of our democracy. For too long the closed door approach has obstructed that process. For that reason, I commend the Bill to the House.

On Question, Bill read a second time, and committed to a Committee of the Whole House.